One of the most integral and utmost part of the management of any organization is the Compensation Management.

It is a systematic and periodic approach through which employees are being rewarded for their efforts which they inset at their workplaces. Compensation is comprised of wages, incentives, rewards and other benefits given to the workers. The employees of 21st century work not only for the monetary rewards but also for something extra and in Human Resource Management this is referred to as Benefits. Rewards are of different types depending on their nature. Rewards have been distinguished in the following types:

-financial Rewards -based versus Membership-based Rewards Intrinsic rewards are those that are self-initiated rewards. These rewards are based on the selfcontentment arising from the job itself. Intrinsic rewards are often known as intangible rewards, for example being part of a group, a feeling arising from accomplishment of goals and pride and satisfaction arising from ones own work. Whereas extrinsic rewards are the benefits provided by the managers also known as tangible rewards such as salary increment, bonus, sales commission etc. These rewards include monetary rewards, promotions of employees and other different kinds of benefits. Financial rewards are those which are given to the employees in the form of money and help to improve the employees financial position. Non-financial rewards comprise of inexpensive rewards to enhance an employees morale. Organizations also offer rewards to its employees on the basis of their membership or high performance (DeCenzo and Robbins, 2006). Compensation management is used to motivate and retain employees and ultimately it aims at improving the overall effectiveness of an organization. An organization develops its compensation structures in accordance with its goals, objectives and strategies. Compensation management is advantageous to both employees and employers. It is beneficial for the employer in the sense that it lowers the absenteeism rate. If any employee is happy with his work and he is satisfied with the current salary and benefits he is getting then why would he make a day off from the job? Secondly it helps to motivate the employee to work harder because employees know that after achieving a certain level of goals/target; they would be rewarded or given an increment. Thirdly, it helps to make the employees feel satisfied with their jobs. If the employees are happy with the duties and responsibilities they perform and with the pay and rewards they get in exchange, they would never think of leaving that job and would love to stay with that organization. Compensation is also advantageous to the employee in a way that it injects self-confidence. Offering different schemes of rewards etc is a way of acknowledging the efforts of employees which helps the employee to ponder on the point that he/she as well as his/her work is being valued by the organization. It also works as stress reliever. When an organization is offering different sorts of insurances to the employee, it will relieve many of his fears.

Low satisfaction from the job and increased absenteeism rate are the consequences arising from the insufficient and inadequate benefits (DeCenzo and Robbins, 2006). Among the 4 Ms i.e. Men, Money, Machine and Material, men are the most important. Employees working in any organization are the building blocks of that organization. To keep them happy, satisfied and to retain them in the organization, money given to them in the form of wages should essentially be adequate. An effective management is that which makes a comparison of its compensation plans with the other jobs in the industry or with the established benchmark. Rizwan (2010) explored that the modern organizations try to integrate employee commitment and the performance level of any organization. To keep the employees self-esteem and sense of worth elevated, rewards are the most contingent factors that are being used by the management of the organization. The performance evaluation and rewards are the two factors which are considered to be the cornerstone for the performance evaluation programs. So rewards are an essential part of compensation management as well as of performance evaluation program. Ali & Ahmed (2009) supported the idea that every employee serving in any 0rganization expects that his organization will provide him healthy working environment, a fair wage to fulfill his needs and will treat him equally without any biases. Employees can even demand more safety and security, power and authority and the duties and responsibilities which they perform in their work premises. Furthermore, they stressed that there is a direct link between organizational performance and employee performance and if employees performance is enhanced, organizational performance will enhance automatically. If organizations want to understand these expectations, there should be an understanding of employee motivation (Beer et al., 1984, cited in Ali & Ahmed, 2009). According to Rasheed et al (2010) along with sound mentoring and coaching mechanisms for employee learning support, motivation of an employee is highly increased by tangible and intangible rewards given to him against his high performance. In this regard, human resource managers always put their heads together for developing and improving comprehensive compensation plan for employees.